Innovative SCF programme for major European retailerMAJOR RETAILER - eUROPE
When a major European retailer was looking to set up an innovative Europe-wide Supply Chain Finance programme, it approached Demica. A key component to the transaction was being able to use external finance to fund early payment discounts offered by suppliers of the client. The profit from the difference between the supplier discounts and the cost of funds was then to be used to finance an extension in the repayment date of the external funding by 90 days.
Demica’s platform was ideally suited to this structure as it is able to balance funds deployed in capturing discounts and those used to extend payment terms and automatically optimise them at the points when the programme was capital-constrained. The programme is based on the daily upload of invoice and payments data from the client’s ERP system to Demica to identify discounts available for capture; the rules engine then manages capital deployment and the payment processing module seamlessly moves funds between funder, client and suppliers.
The client and funder have access to a web interface for reporting and authorisation of transactions where required. Currently funded by one bank, the programme has proved so successful that we expect to onboard a second funder shortly.
The net result of the programme has been a material improvement in our client’s working capital, with payments to key suppliers increased from 90 to 180 days at no cost to our client.